Debt Forces Mandala Airlines to Ground All Planes - Budget carrier Mandala Airlines says it’s grounding all planes immediately as it tries to settle spiraling debts and find ways to survive cutthroat competition in Indonesia’s skies. Company spokeswoman Nurmaria Sarosa said Thursday the domestic carrier is seeking a cash injection from new investors.

She says Mandala also will start restructuring the airline and as part of efforts to make it more economically viable will try to find ways to double its fleet of five Airbus A320 jets.

Dozens of airlines have emerged since Indonesia started deregulating the industry in the late 1990s. But the rapid expansion, followed by a string of deadly accidents, has put a spotlight on aviation safety.

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The Best Solution Mandala Can Take to Survive - Indonesian budget airline PT Mandala Airlines suspended operations Thursday as it seeks to restructure debt and secure strategic backers. President Director Diono Nurjadin said a debt restructuring request would be filed in the the Commercial Court in a bid to keep the airline aloft.

“This is the best course of action to ensure the continued survival of the airline,” Nurjadin said in a statement. “Over the past few months, Mandala Airlines has been performing at a commercial loss and the situation now is such that we need to restructure the company to pave the way for the entry of new investors.”

He told reporters operations would cease temporarily “so we can focus on debt restructuring and invite several potential investors”. The company did not release details of how much money it owed nor the identity of its creditors.

Mandala is 51-percent owned by PT Cardig International and 49 percent by US-based Indigo Partners LLC, according to its website. An airline spokeswoman said the carrier stopped renting six aircraft in March as costs were too high, and currently operated five aircraft.

“We’re optimistic we can find new investors and meet the minimum requirement of 10 aircraft by 2012,” she told Dow Jones Newswires. Industry analysts have previously said the country’s aviation industry will need to consolidate in the near term as capital requirements and costs, notably fuel prices, continue to rise.

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The government is mulling setting up an independent team to monitor and evaluate the realization of Garuda Indonesia’s plan to raise up to US$350 million through an initial public offering (IPO) this year. "So far, an independent evaluating committee has been formed to monitor Krakatau Steel’s (IPO). Right now we are considering whether or not it (the committee) is suitable for Garuda’s IPO," State Enterprises Minister Mustafa Abubakar said at the presidential palace here on Wednesday. The committee had proven effective to monitor the state-owned steel maker’s IPO, he said. He expressed hope such a committee could be set up to supervise the national flag carrier’s IPO.

"It is likely we will order the formation of such an independent team to monitor Garuda’s IPO," he said. He said the state enterprises ministry, along with other relevant agencies were still discussing preparations for Garuda’s IPO. One of the issues discussed was the price of shares offered in the IPO. Garuda is expected to sell 30 percent of its shares through the IPO scheduled for February 11, 2011. To conduct the IPO, Garuda has appointed PT Danareksa Sekuritas, PT Bahana Securities, and PT Mandiri Sekuritas as domestic underwriters, and UBS and Citibank as foreign underwriters. Garuda booked a net profit of Rp194 billion in the year ended September 30, 2010.

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